Salaries can't be legislated on: Mittal

A day after Prime Minister Manmohan Singh raised the issue of excessive remuneration to promoters and senior executives at the Confederation of Indian Industry's National Convention, the industry association's new president, Sunil Bharti Mittal, said no one could coerce industry to spend in a particular way.

"The prime minister's message has to be taken in the right spirit. It reflects his concerns. He has appealed to industry to exercise restraint in the way it spends, quite like a parent advising a child," he felt.

Mittal also sought to point out that Singh's remark on excessive remuneration and ostentatious expenditure would apply to only a few in the corporate world: "Only a handful of promoters and CEOs, including myself, are in the (compensation) brackets the prime minister was referring to."

Though some headhunters said Indian CEOs are overpaid given the size of their businesses, various executives Business Standard spoke to said salaries and perks need to reflect market realities.

With rapid economic growth in the last few years, Indian companies are facing an acute shortage of top managerial talent, resulting in a sharp rise in salaries.

EMA Partners, a search firm for top executives, reckons India will need 750 business heads and over 5,000 functional heads over the next 2-3 years, based on current and future economic growth.

Mittal too drew attention to the massive shortage of skilled and experienced managers in the country. High salaries paid to executives are more a function of the lack of top level talent and skills and the consequent need to pay top dollar to hire people for running companies, he said.

Most executives said the prime minister's remarks should not be read as a move to bring private sector salaries under some sort of control.

Planning Commission Deputy Chairman Montek Singh Ahluwalia said the government had no plans to cap salaries of senior executives.

"To my knowledge, there is no such proposal. The prime minister has only asked industry to moderate the excessive salaries paid to top executives. Even developed countries like the US and the UK are debating this issue," he said.